Points of Interest ©

Media headlines shout out the bad news.  Real estate sales are down. Foreclosures are up.  Banks and other financial institutions are taking losses on mortgage investments.

But some of our customers are taking advantage of this momentary dislocation in the residential housing market.  They are using this situation to their advantage.  Smart buyers in the Virginia counties of Fairfax, Loudoun, Arlington, Prince William and beyond are taking advantage of the prices now being offered.

Take the case of a long time customer of ours.  This person was a successful professional with a solid job history, moving from one position to other more challenging ones with higher compensation.  Our customer, let’s refer to them as Denise, had the good fortune of purchasing a home in the early 90’s.

But not unlike many professionals, it was difficult to accumulate savings on a regular basis.  And in this particular case, Denise’s credit history had suffered during one period of a temporary layoff.  Being single and the only income source, recovering from that hiatus left her credit score in the mid 500’s.  Not the typical second home buyer’s credit profile.

This did not deter Denise from pursuing her dream.  Denise, you see, comes from a large extended family and many of her relatives have a second home in the country.  Denise, too, wanted a place to get away after a hectic week at the office.  Who doesn’t?  Besides that, another tax break couldn’t hurt.

Qualifying for two mortgages is no simple task for most two earner families.  With only one income and no savings to speak of, Denise’s challenges grew with a middle credit score below 580.  Typically, that credit score would demand a substantial down payment or equity.  Due to these factors, Denise and I discussed the potential need for private money financing and the higher costs that are connected with that solution.

When Denise’s late relative’s house dropped in price once again, Denise realized it was time to act.  As an heir to the estate she could use her inheritance at the time of sale as a major portion of her equity.  We ran her application through Fannie Mae’s Desktop Originator (“DO”), an automated underwriting system (“AUS”) available to MetFund.  And to everyone’s great satisfaction we received “Approve/Eligible” findings from DO.  This saved Denise about 5% on her interest rate.

We always try Desktop Originator for every conforming loan regardless of credit score, debt to income ratios or lack of savings.  It’s lucky for Denise that we did.  With a low credit score, inheritance money from the sale of the property that she was purchasing, liquidating some additional cash from an existing retirement account, and negotiating a 3% seller concession to cover the majority of the closing costs, Denise now has a lovely second home in the country.  You can find her there most weekends recovering from the week at the office.